CEO says Groupon isn't in trouble

Groupon forecasts U.S. sales in August will increase about 12 percent over the previous month. Marketing expenses, expected to fall 20 percent this month, will continue to decline as the company shifts its focus from acquiring new subscribers to converting them into paying customers, CEO Andrew Mason said in the letter.File photo

Bloomberg News

Groupon Inc. Chief Executive Officer Andrew Mason said the digital coupon company is growing and widening its lead over rivals, addressing concerns raised about the business as it prepares for an initial public offering.

"When I read some of the press this weekend, I realized a rational person could read this stuff and wrongly conclude that we're in trouble," Mason wrote in a memo sent to employees and obtained by Bloomberg News. "The irony is hopefully clear: We've never been stronger."

Groupon forecasts U.S. sales in August will increase about 12 percent over the previous month. Marketing expenses, expected to fall 20 percent this month, will continue to decline as the company shifts its focus from acquiring new subscribers to converting them into paying customers, Mason said in the letter.

The Chicago company abandoned controversial figures for adjusted consolidated segment operating income, or adjusted CSOI, in an amended initial public offering filing earlier this month. The U.S. Securities and Exchange Commission was examining that accounting practice in a routine review of Groupon's proposed $750 million IPO, a person familiar with the matter said on July 27.

"The reason everyone in the world seems to hate ACSOI is that it makes us look magically profitable by subtracting a bunch of our customer acquisition marketing costs from our expenses," Mason said in the memo, which was first reported today by AllThingsDigital. "We think it actually does a pretty good job at describing our marketing expenses in a steady state."

Mason also accused daily coupon rival LivingSocial.com of buying gift certificates from national retailers and reselling them to users "to give the appearance of a 50% off deal." Groupon gained market share at the expense of LivingSocial in July, according to data released today by website Yipit Inc.

Brendan Lewis, a spokesman for Washington-based LivingSocial, declined to comment.

Internationally, Groupon is improving profitability in every country it operates, Mason said. "Every country is either losing less or making more." The company's joint venture in China recently fired a large number of workers for poor performance, a person with knowledge of the matter said earlier this week.

Groupon Getaways, a service for discounted airfare started last month in partnership with Expedia Inc., generated revenue of $10 million in its first month, according to Mason's memo.